Question

0981283248l.e

1.Kenia is a small economy somewhere in the Aka Way. The information given in Table 5 is from a recent issue of the Kenia Economic ObserverThere are only 3 goods produced in Kenia.The table below shows the prices and quantities produced of these goods in 2007, 2008, and 2009 as well as other related data. 2008 is the base year for this economy.

Data	2007		2008		2009
	Price	Quantity	Price	Quantity unit	Price	Quantity
Good A	20	38	10	42	23	53
Good B	35	410	38	450	38	452
Good C	15	120	18	128	19	130
Population millions	3700		4600		4900
Employed millions	3310		4328		4818
Not in the labour force millions	221		235		245

a)      Calculate:

(i) The unemployment rate in 2008. Show the formula and workings.(3.5 marks)

(ii) The labor force participation rate in 2009. Show the formula and workings.(2.5 marks)

(iii) GDP deflator 2008. Show the formula and workings.(4.5 marks)

(iv) GDP deflator 2009. Show the formula and workings.          (4.5 marks)

(v) the inflation rate in 2009. Show the formula and workings. (1.5 marks)

Suppose that in a simple economy, only two types of products are produced: computers and automobiles. Sales and price data for these two products for three different years are as shown below:

Year	No. of Computers Sold	Price per Computer	No. of Automobiles Sold	Price per Automobile
2003	500	$6000	1 ,500	$12,000
2004	1 ,000	.$2000	5,000	$20,000
2005	1 ,500	$1300	6,000	$23,000

a)Assuming that all computers and automobiles are final goods, calculate nominal GDP in 2013, 2014 and 2015.    (4.5 marks)

Nominal GDP in 2003:

Nominal GDP in 2004:

Nominal GDP in 2005

b)Calculate real GDP in 2004 and 2005 year using 2003 as the base year. Show the formula.

Thanks for the help really appreciated it Expert!

Answer 1

A.

1.

Unemployment rate in 2008 = Unemployed people/labor force

Unemployment rate in 2008 = (4600-235-4328)/(4600-235)

Unemployment rate in 2008 =.85%

2.

Labor force participation rate in 2009 = labor force/adult working population

Labor force participation rate in 2009 = (4900-245)/4900

Labor force participation rate in 2009 = 95%

3.

Since 2008 is the base year, so nominal GDP is equal to real GDP in 2008.

So,

GDP deflator in 2008 = (nominal GDP/real GDP)*100

GDP deflator in 2008 = 100

4.

GDP deflator in 2009 = ((nominal GDP/(real GDP))*100

GDP deflator in 2009 = ((23*53+38*452+19*130)/( 10*53+38*452+18*130))*100

Here, real GDP is calculated in 2009 on the basis of base year price of 2008)

GDP deflator in 2009 = 104.09

5.

Inflation rate in 2009 = (GDP deflator in 2009 – GDP deflator in 2008)/ GDP deflator in 2008

Inflation rate in 2009 = (104.09-100)/100

Inflation rate in 2009 = 4.09%

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